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Published on Oct 21, 2016
The
market's minnows are swimming away from its whales as the Russell 2000
Index is up about 8% compared with the 5% gain in the S&P 500. Ralph
Bassett, portfolio manager for the Aberdeen US Small Cap Equity Fund
GSXAX, said there are a slew of good reasons for the surge in small
caps. "They get more domestic orientation so they have less volatility
and overseas revenue. Meanwhile, M&A activity in the sector is
holding strong," said Bassett. The Aberdeen US Small Cap Equity Fund is
up 9% thus far in 2016, according to Morningstar. The $310 million fund
has returned an average of 10.5% annually over the past three years,
outpacing 99% of its rivals in Morningstar's small cap growth category.
Bassett is particularly bullish on Parexel International PRXL. Shares of
the biopharmaceutical services company, which provides clinical
research and logistics, are flat year-to-date. However, Bassett believes
Parexel has very healthy long term prospects for revenue and margin
improvement. "Their short term issue is the conversion of their backlog
given the higher complexity of trials. They will get through this," said
Bassett. He is also positive on shares of G-III Apparel Group, down 37%
year-to-date, saying the company's management is strong enough to get
through its short term issues surrounding its Donna Karan acquisition.
"We expect those to begin to be cleared up in 2017, which will certainly
help sentiment," said Bassett. Finally, Bassett is a fan of Quaker
Chemical KWR, up 35% thus far in 2016, saying the company's "robust
business model" gives it room for margin expansion. "Quaker's strong
balance sheet will enable it to make acquisitions on the metals side as
well," said Bassett about the company which reports it's third quarter
results after the market closes next Wednesday.
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